Student Loan Delinquencies Are Back, and Credit Scores Take a Tumble

Andrew F. Haughwout, Donghoon Lee, Daniel Mangrum, Joelle Scally, and Wilbert van der Klaauw

This morning, the Center for Microeconomic Data at the New York Fed released the Quarterly Report on Household Debt and Credit updated through the first quarter of 2025. Over the first quarter, overall household debt rose by $167 billion. An increase of $199 billion in mortgage balances and modest increases in home equity lines of credit (HELOC) and student loans were offset by declines in auto loans and credit card debt of $13 billion and $29 billion, respectively. The decline in credit card balances is a typical seasonal pattern associated with consumers paying down holiday spending from the fourth quarter, but the auto loan decline was atypical, the first such decline since the third quarter of 2020. The rates at which auto loans and credit cards became seriously delinquent improved slightly, while mortgage and HELOC transition rates edged up but remained low. However, the delinquency rate for student loans stands out: it surged from below 1 percent to nearly 8 percent, as the pause on reporting delinquent federal student loans ended. In this post, we focus on student loan delinquency, including which borrowers are past due and what it might mean for their access to credit.

How Many Borrowers Are Behind on Student Loan Payments?

Payments on federal student loans were paused for forty-three months, beginning at the start of the pandemic in 2020 and lasting though September 2023. During this time, the delinquency rate on student loans fell to less than 1 percent. After the resumption of payments, a one-year on-ramp was instituted which prevented negative remarks of missed payments from being reported to credit bureaus. That on-ramp expired in October 2024 and delinquencies began appearing on credit reports during the first quarter of 2025.

In this post, we deviate from the typical delinquency rate reported in the Quarterly Report (page 12), which shows the share of outstanding student loan balances that were at least ninety days past due at the end of the first quarter. Instead, we focus on a borrower delinquency rate by computing the share of student loan borrowers with at least one student loan reported as past due or in default. [Technical note: This analysis and the Quarterly Report use the New York Fed Consumer Credit Panel (CCP), a representative panel of anonymized credit reports from Equifax. Defaulted loans are removed from credit reports after seven years, so we can only account for defaulted loans that still appear on credit reports. The loans still appearing on credit reports make up roughly 1.7 million of the 5.3 million defaulted borrowers. Additionally, federal defaulted loans were transitioning back to delinquent status at the end of the first quarter, but not all loans were marked delinquent by the end of March. For this analysis, we consider all defaulted loans in the CCP as past due regardless of reporting status.]

The chart below shows the borrower delinquency rate in the first quarter of 2020 and the first quarter of 2025. We split borrowers into three categories. In blue, we show the share of borrowers who had a loan ninety or more days past due or in default, which was 13.7 percent, or nearly six million borrowers, this quarter, as compared to 14.4 percent in the first quarter of 2020. The remaining borrowers are split into whether they had a payment due (in gold) or whether they had no payment due (in gray). Student loans are unique in that in any given quarter, a large share of student loan borrowers is not required to make payments, and thus cannot go delinquent. These are borrowers who are not yet in the repayment cycle of their loans (that is, they are in deferment, forbearance, or are currently enrolled in school) or are enrolled in a repayment plan that may require zero-dollar monthly payments.

At the end of the first quarter, more than twenty million federal borrowers were not in repayment and five million federal borrowers had a zero dollar monthly payment. In the next set of bars, we show the borrower delinquency rate after removing borrowers without a payment due (henceforth, the conditional borrower delinquency rate). Among borrowers who were required to make payments, nearly one in four student loan borrowers (23.7 percent) were behind on their student loans in the first quarter of 2025.

Fewer Student Loan Borrowers Are in Repayment, but a Higher Share Is Delinquent

Sources: New York Fed Consumer Credit Panel/Equifax; author's calculations.
Notes: The chart shows the share of student loan borrowers in three bins. The blue area represents the share of borrowers with delinquent or defaulted student loans. The gold area represents the share of borrowers who have a scheduled monthly payment due and are not past due on any student loan. The gray area represents borrowers with no monthly payment due across their student loans. The data represents 44.6 million student loan borrowers in the first quarter of 2020 and 43.7 million in the first quarter of 2025.

The map below shows how this conditional borrower delinquency rate varies across states. Seven states have a conditional, borrower-level delinquency rate above 30 percent: Mississippi (44.6 percent), Alabama (34.1 percent), West Virginia (34.0 percent), Kentucky (33.6 percent), Oklahoma (33.6 percent), Arkansas (33.5 percent), and Louisiana (31.8 percent). Meanwhile, only five states have rates below 15 percent: Illinois (13.7 percent), Massachusetts (14.0 percent), Connecticut (14.5 percent), Vermont (14.7 percent), and New Hampshire (14.8 percent).

Who Fell Delinquent on Student Loans?

Next, we explore who fell delinquent on their student loans by age. Even after conditioning on those with a payment due, the borrower delinquency rate is lowest for those under 30. For each age group over 40, at least one in four student loan borrowers was more than ninety days past due on their payments in the first quarter of 2025. This pattern suggests an aging of the delinquent population of student loan borrowers, as the average age of a delinquent borrower increased from 38.6 to 40.4.

More Than a Quarter of Student Loan Borrowers over 40 with a Payment Due Are Delinquent

Sources: New York Fed Consumer Credit Panel/Equifax; author's calculations.
Notes: The chart reports the student loan delinquency rate separated by age groups for those with a payment due. The blue bars show each age group's conditional delinquency rate in the first quarter of 2020 and the gold bars show the rate in the first quarter of 2025.

Lastly, the table below breaks out the percentages of student loan borrowers who were newly delinquent in the first quarter of 2025 by the borrower's credit score in the fourth quarter of 2024 (credit scores are Equifax Risk Score 3.0). More than half of the newly delinquent borrowers already had subprime credit scores. For these borrowers, the new delinquencies are unlikely to materially affect their access to credit since they had scores for which they would likely not be approved for new credit. However, 2.4 million of the newly delinquent had scores above 620 and many would have qualified for new auto, mortgage, and credit cards before these delinquencies were reported. These borrowers saw substantial declines in their credit standing in the first quarter and will now face steeper borrowing costs or denial for new credit. In total, more than 2.2 million student loan borrowers who became newly delinquent saw their credit scores drop more than 100 points and more than one million saw drops of at least 150 points.

Almost Half of Newly Past Due Face Damage to Previous Credit Access

Credit score group	Count (millions)	Share of newly delinquent population	Average credit score change
Less than 620	3.2	56.6%	-74
620 - 719	2	35.9%	-140
Greater than 720	0.4	7.5%	-177

Sources: New York Fed Consumer Credit Panel/Equifax; author's calculations.
Notes: The table shows data for student loan borrowers that were current on their student loans in the fourth quarter of 2024 but had at least one student loan that was ninety or more days past due in the first quarter of 2025, broken out by categories of credit scores from the fourth quarter of 2024. Additionally, we report the average change in credit score for each credit score group from 2024:Q4 to 2025:Q1. Credit scores are Equifax Risk Score 3.0. Borrowers whose loans were defaulted but not yet reported as past due at the end of 2025:Q1 are included in the counts and the percentages of the newly delinquent but are not figured into the average credit score change.

What Is in Store for Past Due Borrowers?

After a five-year hiatus, student loan delinquency has returned to the pre-pandemic "normal" with more than 10 percent of balances and roughly six million borrowers either past due or in default. The ramifications of student loan delinquency are severe. The U.S. Department of Education, in concert with the U.S. Treasury, began collection efforts for defaulted loans in May, which includes the garnishment of wages, tax returns, and Social Security payments. Additionally, millions of borrowers face steep declines in their credit standing which will increase borrowing costs or seriously limit their access to credit like mortgages and auto loans. It is unclear whether these penalties will spill over into payment difficulties in other credit products, but we will continue to monitor this space in the coming months.

How to cite this post:
Andrew F. Haughwout, Donghoon Lee, Daniel Mangrum, Joelle Scally, and Wilbert van der Klaauw, "Student Loan Delinquencies Are Back, and Credit Scores Take a Tumble ," Federal Reserve Bank of New York Liberty Street Economics, May 13, 2025, https://libertystreeteconomics.newyorkfed.org/2025/05/student-loan-delinquencies-are-back-and-credit-scores-take-a-tumble/.